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JOINT CIRCULAR

Guiding the allocation and fulfillment of the 2006 textile and garment quotas for export into the us market

Pursuant to the Agreement on Trade in Textiles and Textile Products of Cotton, Wool, Man-Made Fiber, Non-Cotton Vegetable Fiber and Silk-Blend, concluded on July 17, 2003, between the Government of the Socialist Republic of Vietnam and the Government of the United States of America (hereinafter called the Vietnam-US Textile and Garment Agreement for short) and documents recording and extending the validity of this Agreement;

Pursuant to current regulations on management of goods import and export;

Based on the situation of textile and garment export into the US market;

After consulting with the Vietnam Textile and Garment Association;

The Ministry of Trade and the Ministry of Industry (hereinafter referred collectively to as the ministries) hereby jointly guide the allocation and fulfillment of the 2006 textile and garment quotas for export into the US market as follows:

I. GENERAL PROVISIONS

1. Quota-application scope:

The textile and garment quotas for export into the US market cover 38 categories (Cat.), including 13 double Cat. and 12 single Cat. as specified in the Appendix to this Circular.

2. Subjects of quota allocation and implementation

To be allocated quotas, traders must fully satisfy the following conditions:

2.1. Having business registration certificates, having registered import-export business identification numbers or having investment licenses under the Law on Foreign Investment in Vietnam;

2.2. Having textile and garment production capacity;

2.3. Lawfully owning at least 100 industrial sewing machines (1-needle and 2-needle machines), which are in good working conditions. Having adequate documents proving their lawful ownership of the aforesaid machines and equipment. For categories, the production of which do not require industrial sewing machines, traders must have sufficient machines, equipment and workshops satisfying the requirements on production of such export textiles and garments.

The quantity of hired machines (not by the mode of financial hire-purchase) shall not be counted into their ownership.

Where new traders (traders who have never exported goods of quota-regulated categories into the US market) wish to export such goods, they shall have to request in writing the Trade Services or Trade and Tourism Services of their provinces or centrally-run cities to organize inter-branch inspection teams, and shall be considered for quota allocation after the Textile and Garment Quota Regulation Board receive the inspection teams' reports.

2.4. Having qualified staffs capable of understanding import-export and commercial policies in order to carry out procedures related to quotas as well as import and export documentation.

The ministries request traders to visit the Trade Ministry's website: www.mot.gov.vn every day so as to update and apply guidelines of the ministries in a way suitable to the regular changes in the textile and garment industry.

II. PROVISIONS ON QUOTA REGULATION AND FULFILLMENT

1. Bases and time limits for quota regulation and fulfillment:

From January 1, 2006 to June 30, 2006, the ministries shall grant automatic visas for all categories stated in Section I.1. In the period from January 1, 2006 to June 30, 2006, the ministries shall allocate quotas of categories for which around 70% of the total 2006 quotas have been fulfilled on the basis of export achievements in the first months of 2006 and traders' export demand for the time to come.

By June 30, 2006, automatic visas shall be further granted for categories for which less than 70% of allocated quotas have been fulfilled. In case of necessity, the ministries may announce the further regulation of categories for which nearly 90% of the total 2006 quotas have been fulfilled.

2. The ministries, basing themselves on the situation of fulfillment of quotas of textile and garment export into the US market in each period, may adjust the lists of categories entitled to quota allocation or the grant of automatic visas, amend and supplement guidance on the grant of automatic visas, and guide the application of deposits or guarantees or other appropriate measures.

3. Implementation effect:

In cases where the ministries allocate partially or wholly 2006 quotas for any category, the 2006 quotas shall be effective for goods lots of such category leaving Vietnam as from January 1, 2006 to a specific time stated in the quota-allocation notice, but no later than December 31, 2006.

4. Grant of visas and automatic visas:

The grant of visas shall comply with the Trade Ministry's Circular No. 03/2003/TT-BTM of June 5, 2003, guiding the grant of visas for export of textiles and garments into the US market under the Vietnam-US Textile and Garment Agreement and its guiding documents.

Provisions on the grant of automatic visas: Traders meeting all conditions specified in Item I.2 above (including new traders not yet allocated quotas for export into the US market) shall be granted automatic visas for export of textiles and garments into the US market. When carrying out procedures for the grant of automatic visas for the first time, new traders should produce to regional Import-Export Management Bureaus the written certification of production capacity, made by the inter-branch inspection teams.

Lots of goods produced or processed in Vietnam with the use of imported semi-finished products shall be granted visas for export into the US market, if they are granted certificates of Vietnamese origin and satisfy US provisions on goods origin.

5. Export consignment and acceptance of export consignment:

The consignment and acceptance of export consignment of textiles and garments shall comply with the Government's Decree No. 57/1998/ND-CP of July 31, 1998, and Decree No. 44/2001/ND-CP of August 2, 2001.

Achievements recorded in the fulfillment of consigned quotas shall be regarded as export achievement of the consigning traders.

6. Transfer of quotas:

If in 2006, the ministries allocate quotas and permit the transfer of quotas, such transfer shall comply with Joint Circular No. 06/2005/TTLT/BTM/BCN of April 1, 2005.

7. Deposit or guarantee for the fulfillment of quotas:

Traders may voluntarily register the deposit or guarantee for all categories so as to ensure that the quotas shall be used in 2006 quotas. Where the quantity of registered quotas exceed the quantity of available quotas, the ministries shall consider and grant quotas to traders who made achievements in export into the US market in 2005 and have contracts signed with US big customers.

The application of deposits or guarantees for the fulfillment of quotas shall comply with Joint Circular No. 15/2005/TTLT-BTM/BCN of August 9, 2005.

III. ORGANIZATION OF IMPLEMENTATION, INSPECTION, SUPERVISION AND HANDLING OF VIOLATIONS

1. The ministries shall guide traders in implementing the terms of the signed Agreement and promulgated regulations and coordinate with the concerned Vietnamese and foreign agencies in settling in time problems arising in the course of implementation. Results of quota allocation and fulfillment shall be published on the mass media and the Trade Ministry's website: www.mot.gov.vn.

Provincial/municipal Trade Services or Trade and Tourism Services shall have to coordinate with provincial/municipal Industry Services and concerned services in organizing inter-branch inspection teams, and with the Textile and Garment Quota Regulation Board in inspecting and determining production and export capacity of traders and combating trade frauds so as to ensure the enforcement of the Vietnam -US Textile and Garment Agreement.

Where it is necessary to conduct unexpected inspection or re-inspection of traders' production capacity or transshipped goods in question, the Textile and Garment Quota Regulation Board shall coordinate with one or several of following units: supervision team, customs offices, provincial/municipal Trade Services or Trade and Tourism Services, regional import-export management bureau and Vietnam Textile and Garment Association in conducting timely inspection and handling of violations.

2. All activities of regulating, allocating, managing and fulfilling quotas on export of textiles and garments into the US market shall be supervised by the inter-ministerial supervision team. The inter-ministerial supervision team shall operate under the current operational regulation.

3. Traders who violate law and current regulations on the fulfillment of quotas on export of textiles and garments into the USA and the Vietnam-US Textile and Garment Agreement shall, depending on the seriousness of their violations, have their quotas partially or wholly withdrawn, be subject to termination of quota allocation or grant of automatic visas, or be handled according to the provisions of law. Specifically as follows:

3.1. Traders who illegally transship goods, make and use counterfeit visas or counterfeit C/O or forge dossiers shall have all their quotas withdrawn and not be allocated or granted new quotas or automatic visas and the dossiers thereon shall be transferred to law-enforcement bodies for handling.

3.2. Traders who falsely declare the contents of quota or visa application, or shirk quota control by the ministries shall have their quotas wholly withdrawn and not be allocated or granted additional quotas and automatic visas.

3.3. Traders who falsely declare their production capacity or export turnovers in order to be allocated additional quotas shall have their quotas additionally allocated due to their false declarations withdrawn and be subject to a fine equal to 30% of the allocated quotas.

3.4. Traders who falsely declare their production capacity shall be subject to a fine corresponding to the falsely declared volume to the total quota volume. Specifically, if the falsely declared volume accounts for less than 10% of machinery and equipment, traders shall be subject to caution and not be allocated additional or development quotas. If the falsely declared volume accounts for 10% or more of machinery and equipment, traders shall be subject to a fine corresponding to the portion of false declaration to the total volume of quotas allocated for this year or previous year.

For traders, who fulfill automatic visas but fail to fulfill allocated quotas and are not subject to the termination of grant of automatic visas, the ministries shall estimate the volume of quotas to be subtracted, if the grant of automatic visas for such categories is suspended for quota allocation, or subtract the volume of quotas into the volume of the to-be-allocated standard quotas, if traders register for other categories, for which quotas are being allocated.

In cases where the forms of violation and the forms of handling violations are not stated in this Joint Circular, the ministries shall examine and handle them on a case-by-case basis.

Other provisions on regulation of textile and garment quotas, which are not stated in this Circular but not contrary to the provisions of this Circular, shall be still effective. Previous regulations contrary to this Circular are hereby annulled.

The ministries shall, basing themselves on the practical situation of production and import-export activities as well as international market in each period, provide detailed guidance and give notices so as to regulate quotas in an appropriate and effective manner.

This Joint Circular takes effect 15 days after its publication in "CONG BAO."